Nepal-European Union (EU) Relations

Brief Introduction of EU:

EU is the most integrated regional bloc in the world, with the national borders becoming less and less relevant over the years. The 28 member bloc is acting as a single political and economic entity playing increasingly important role in the world affairs. With the accession of Croatia as a full-fledged member of the European Union on the 1st of July, 2013 the EU now has 28 members and 24 official languages. It is representing 505.66 million people over a combined area of 43, 24,782 sq.km. It is among the world's largest & most technologically advanced regions. There are three main EU Institutions. They are European Council, European Parliament and European Commission. Two other institutions Court of Justice of the EU and Court of Auditors also play vital roles in the EU. The EU has number of other institutions and bodies. The power and responsibilities of all these institutions are laid down in the Treaties, which are foundation of the EU. Out of 28 countries, 18 countries have adopted the Euro as their currency. Ten countries (Bulgaria, Croatia, Czech Republic, Denmark,Hungary, Lithuania, Poland, Romania, Sweden, and the United Kingdom) are EU members but do not use the Euro. The EU member states Bulgaria, Croatia, Cyprus, Ireland, Romania and the United Kingdom do not belong to the border-free Schengen area. Norway, Lichtenstein and Switzerland are not the EU member states but belong to Schengen area.

Diplomatic relations

Nepal formally tied diplomatic relations with the EU in 1975. EU established its Technical Office at Kathmandu in 1992. Nepal established residential Embassy in Brussels in 1992. EEC accredited its first Ambassador to Nepal in November 1991 with residence in New Delhi. The European Commission opened its Delegation to Nepal after the agreement to this effect was signed on 13 March 2002 in Kathmandu. EU Delegation office in Kathmandu has been upgraded to the Ambassadorial level since 2009 December.
Nepal-EU relations have remained friendly, cordial and cooperative based on mutual understanding, support and cooperation in the fields of economy, trade, humanitarian and development issues. The bilateral relations are guided by shared values and fundamental principles of peace, stability, democracy, human rights, rule of law, good governance and prosperity.

The relationship between the EU and Nepal has further been strengthened by frequent visits of EU parliamentarians and various Nepalese dignitaries. An EU observation mission visited Nepal in 2008 and 2013 to observe the elections to the Constituent Assembly.

The EU has been supporting Nepal’s peace process ever since April 2006, in close cooperation with the international community. While doing so, the EU has been putting emphasis on building trust and guarantee that human rights and the rule of law are respected in all parts of the country.
Nepal and the EU are also engaged through EU's partnering with the South Asian regional bodies, namely the SAARC and ICIMOD. The EU is participating in the SAARC process as an observer since 2007.

Nepal-EC Joint Commission

Nepal and EU signed a Co-operation Agreement in June1996 which provides for a bi-annual Joint-Commission meeting between the two sides. The agreement covers the areas like: trade and commercial cooperation, economic cooperation, development cooperation, joint investment, energy, science and technology, agriculture, environment, and human resource development. This consultative mechanism, which is alternatively convened in Brussels and Kathmandu every two years, provides for a concrete framework to review and further enhance the bilateral relations across the entire spectrum including political, economic, trade and development cooperation.

So far, there have been nine joint commission sessions held. The ninth session was held in November 2015 in Kathmandu, exchanging substantive views on the latest political situation in Nepal, including ongoing peace and constitutional process, and also discussing various ways and means to further strengthen the relationship between the two sides.

The 10th Commission will meet in Brussels.

Development cooperation

After the establishment of the diplomatic relations between Nepal and the European Union, the Union has extended invaluable cooperation to the socio-economic development efforts of Nepal. EEC joined the Nepal Aid Group in 1982 so as to coordinate its position with other donor countries. Besides economic assistance, the European Union has also taken keen interest in the problems of Bhutanese refugees in Nepal.

The European Union has been a valuable and committed development partner of Nepal since the cooperation started. Several EU member countries are longstanding development partners of Nepal. Together with its member states, EU is the largest development partner and second largest trade partner of Nepal.

Until 2013 EU assistance to Nepal used to be provided in two main ways: on a bilateral basis through the formulation of successive Country Strategy Papers (CSP's) in close partnership with the Government of Nepal and on a multilateral basis including all actions outside the CSP mainly funded through thematic budget lines.

Looking at the history of CSP's for Nepal, the first CSP 2001-2006 had €70 million, the second CSP 2007-2013 had allocated €114 million for Nepal. Cumulative contribution from EU to Nepal's development has reached 360 million Euro spread over more than 70 projects till 2013.

Starting from 2014, the EU has begun channeling its development cooperation under its Multi-Annual Indicative Program (MIP). The EU has increased its development cooperation to Nepal by threefold for the current period of 2014-2020 compared to the proceeding period of the same duration. The MIP had identified three focal sectors for Nepal: €146 million for sustainable rural development, with focus on agricultural productivity and value addition, job creation, market access infrastructure, and nutrition (40.5%); €136.4 million for education, with the aim to improving basic education, quality, livelihood skills and equity for vulnerable and disadvantaged (38%); €74 million for strengthening democracy and decentralization, including its engagement in the area of public finance management reform efforts of the government at local and national level (20.5%); and remaining €3.6 million for other support measures (1%). The EU is also a major donor partner of the Nepal Peace Trust Fund.

Other windows of EU cooperation to Nepal come through Asia Regional Cooperation, specifically regarding Aid for Trade cooperation, Aid to Uprooted People, the EU funded Asia Investment Facility and SAARC regional integration as well as a number of initiatives through calls for proposals reaching out to Civil Society such as the European Instrument for democracy and Human Rights (EIDHR) and the Non-State actor/Local Authorities (NSA/LA) Initiative.

Cooperation with European Investment Bank (EIB)

Nepal and EIB signed an umbrella agreement for financial cooperation on the 7th of May 2012 paving the way for major investments from EIB in Nepal's infrastructure and energy sectors. Following the agreement EIB has already committed a loan assistance of Euro 55 million for Tanahu Hydropower Project (140 MW) which has a total cost of US$ 500 million. EIB has also expressed its commitments on immediate additional concessional loan assistance of Rs. 1.5 billion for the same project. Talks are underway for EIB investment of $120 million for Kaligandaki-Marsyangdi Corridor Transmission Project, and $ 30 million for upgrading the Trishuli Corridor Transmission Line. Ms. Magdalena Alvarez Arza, Vice President of the European Investment Bank visited Nepal in June 2014 to work out on those commitments.

EIB's increasing operations in Nepal is a clear and credible signal that there is enhanced business and investment environment in Nepal in the recent years, especially after the completion of the peace process.

Scholarship

Increasingly more and more Nepalese students and scholars are benefitting from the EU funded Erasmus Mundus Program.

Trade

The EU is one of the principal trading partners of Nepal, second largest export market with 13 % share. The EU imports mainly handmade carpets, textile, gems and jewellery, wood and paper products, leather products, etc. from Nepal. Nepal imports engineering goods, telecommunication equipment, chemical and minerals, metal and steel, agricultural products, etc. from the EU countries.
The EU started providing duty-free and quota-free facilities to the Nepalese exports under its Everything But Arms (EBA) policy for the LDCs from 2001. EU introduced the new Generalised System of Preferences (GSP) in 2006 which will remain valid till 2015. Under this scheme, for nearly 2,100 products out of 11,000, except arms and ammunitions, the EU duty rate will be zero.
Given below is a glimpse of trade with the EU region as a whole for the past few years:

US$

Year

Export

Import

Balance

2010

98,574,145

162,100,535

-63,526,390

2011

109,312,644

138,641,229

-29,328,585

2012

82,485,527

145,794,020

-63,308,493

2013

96,687,854

156,912,065

-60,224,211

Humanitarian Aid

The European Commission is one of the biggest sources of humanitarian aid to Nepal. It has long been associated with the efforts of disaster management and mitigation projects in Nepal. EU Humanitarian Aid and Civil Protection Department (ECHO) has provided over Euro 74 million worth of humanitarian aid to Nepal since 2001 A.D. As a gesture of European solidarity to help those who are worst affected by the recent monsoon floods, the EU Delegation office in Kathmandu has provided Euro 250,000 assistance to flood affected people of mid-western region of Nepal in September 2014.

Bhutanese Refugees

The European Union is one of the major sponsors of the United Nations High Commissioner for Refugees' program in the Bhutanese Refugee Camps. The EU has been helping Nepal in providing food aid to the Bhutanese Refugees and other assistance for their resettlement and early repatriation.